(1) Schansberg on Higher-Ed Reform: More Political Theater?

January 14, 2015

by Eric Schansberg, Ph.D.

Barack Obama has proposed free community college for everybody in the United States. At present, according to the American Association of Community Colleges, there are 6.5 million students in public community colleges. Most of their $31 billion in revenues comes from various levels of government. Although their average cost per student is about $5,000, the average student only pays $950 per year in tuition and fees.

The proposal is supposed to cost about $60 billion over the next decade. This estimate is probably based on a static analysis — that only these 6.5 million students would attend community college, imposing an additional burden of $950 per student on taxpayers. A more sophisticated prediction would take into account the likely increases in both the number of students and the average cost per student.

Average costs would be expected to increase with additional subsidies and the greater bureaucracy that typically accompanies more government involvement. We’ve seen how massive government subsidies have had an impact on the overall cost of health insurance and healthcare in the United States over the last 70 years. Or in the field of education: How about the cost of K-12 education, wholly financed by taxpayers, where we currently spend about $300,000 per classroom of 25 students?

There are many other reasons to question Obama’s community-college proposal. Continuing with the cost side: Why should the average family of four pay $780 in higher taxes to support another $60-billion program? In a time of immense federal debt and tight state budgets, why should this be a strong budget priority?

As for the recipients, how will students treat community college if it’s completely free? Will they value the education appropriately and become more responsible individuals? More broadly, is it smart for society to create another “entitlement” program?

From the market’s perspective: How will the perception of a community-college degree be changed within the labor market? With concerns about a “bubble” in higher education, is it wise to increase government subsidies into that sector? Only 20 percent of community-college students complete a two-year program within three years. Are we imagining that the benefits are greater than they would be?

Needs-based subsidies for higher education are already in place through Pell Grants. Why is it wise to subsidize community-college tuition for all students, even those from upper-income families? As with the minimum wage, the policy is poorly-targeted — in this case, subsidizing all students, rather than just those with fewer means. Given all of these concerns, the policy proposal seems more political theater and cynical political games than good (or even serious) public policy.

Interestingly, Governor Mike Pence has proposed increased funding for vouchers and charter schools. Other school reformers, including the Indiana Policy Review Foundation, are calling for “backpack funding,” which follows each student to the school of their choice (and varies with student needs). With these policy choices, the approach is to finance the decisions of parents and children, rather than sending money to a school and then forcing students to attend that school.

Barack Obama could have proposed free community college but only at the community college closest to each person’s house. Instead, he said that we should empower students to obtain educational services at the community college of their choice.

Given that we’ve decided, as a society, to finance K-12 education, why not give those parents backpack funding as well — so that those with any level of income have the freedom to choose the school that’s best for their families?

Eric Schansberg, Ph.D., an adjunct scholar of the Indiana Policy Review Foundation, is a professor of economics at Indiana University Southeast.

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